R04 - I think an exam question was incorrect

Hi all

I sat R04 yesterday, and passed (thank God), but I think one of the questions was incorrect. I'll put it below (to the best of my memory), and would be grateful if you guys could review it and see if I am missing something massively obvious here:

Mr X, a higher rate tax payer, was a member of his company’s occupational pension scheme between September 2015 and August 2017, and has recently left employment and requested a refund of his pension contributions. He has received a net payment of £23,000. How much tax is the scheme administrator liable to pay:

  1. None

  2. Not sure – it was around the £4,000 mark

  3. £4,000

  4. £11,500

However, I make the answer £11,000. My best guess is that there is a typo in the question, so the net amount should read £23,500 instead, but am I missing something here?



  • Sorry, option 3 should read £8,000.
  • I make the answer to be £5,500. 
  • Hi Yelsnat

    Thanks for responding. Could you please explain your rationale/calculation?

    It was my understanding that the first £20k of a refund of premiums was subject to 20% tax, with anything above this figure subject to 50% tax. Which, on that basis, the first £16k of the net payment represents the first £20k gross (with £4k tax levied), and the remaining net amount, of £7k, representing the next £14k gross that was subject to 50% tax (and therefore, a further £7k tax levied). £4k + £7k = £11k.

    Would love to understand how you reached £5,500, as it would indicate I am missing something vital here.


  • Hi

    Just sat the R04 exam today and the £23,000 was actually GROSS figure.

    this means the first £20,000 is taxed at 20% for £4,000 with the remaining £3,000 being taxed at 50% for £1,500.

    this means that the amount of tax paid would equal £5,500.

    Hope that clears everything up for you!

  • Hi Alex

    Thanks for that. That would certainly make more sense!

    I was so certain I read net! haha. Oh well, I guess that is one question I got wrong!

    Nevermind, at least the mystery is solved!

    Thank you.


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